Hon Chuan Group: In-house Supplier of Beverage Packaging Materials
Hon Chuan, a leading producer of polyethylene terephthalate (PET) bottles in Taiwan, has developed a unique production setup to serve its Asian clients. The company has established production facilities at clients’ sites, using its in-house, in-line operation, which has won over beverage companies across Asia. This new operation model allows beverage companies to reap the advantages of outsourcing without incurring any related drawbacks. The beverage companies enjoy the benefits of vertical integration without bearing the associated costs. The case highlights this operational innovation, which helped Hon Chuan grow from a small family-owned business serving mostly Taiwanese clients to a publicly traded company controlling dozens of production plants across Asia.
The case can be used in a strategic management course at the MBA or undergraduate level. It provides a unique setting for students to analyze the choice of integration versus outsourcing from the perspective of beverage companies. The in-house, in-line operation model created by the packaging manufacturer to better serve its clients can be treated as a hybrid of two choices: PET bottles outsourced from an independent supplier are made at an adjacent integrated plant. This operational innovation represents the packaging manufacturer’s strategic move to become a dominant maker of PET bottles in Asia.
The case can also be used in a supply chain management course at the MBA or undergraduate level. The analysis can start with the logistic issues regarding PET bottle outsourcing (e.g., transportation costs and contamination risk), followed by a discussion of the drawbacks of integration (e.g., lack of scale economies and operation incompatibility). The in-house, in-line operation setup created to manage the supply chain reconciles the trade-offs between integration and outsourcing.
Taiwan, Large, 2011
$5.30 CAD / $5.00 USD Printed Copy